Tuesday 29 July 2008

Successful Low Volume Test - Bingo!

Bingo! Looks like the test back down to 1,200 has been successful. Let's take a look at the big picture first with the weekly Emini chart and Hilbert Sine Wave.

Emini Weekly Hilbert Sine Wave Image

Hilbert Sine Wave (Emini weekly)

The cyclical low cross happened 3 weeks ago but this needs to be confirmed with:

Break above prior bar's high
"End of Trend" signal on lower time frame, and
Confirmation large volume up bars

Last week the Emini broke above the prior week's high and so the first condition was met. The Better Sine Wave indicator then starts plotting the cyclical low Support levels (red dots, one so far on the chart above).

Emini 135 Minute Chart Image

"End of Trend" Signal and Volume Confirmation (Emini 135 minute)

Next we drop down a couple of time frames to the 135 minute chart and look for an "End of Trend" signal. One time frame down from the weekly chart would be the daily chart. Then another time frame down from the daily chart would be the 135 minute chart (exactly 3 bars per trading day). I like to use a ratio of 3 between time frames but daily to weekly is a ratio of 5 and will just have to be good enough.

The 135 minute Emini chart above shows we broke into a down trend on June 20 (white dot). On July 18 we got a Pull Back signal (automatically marked "PB" on the chart). Normally we get a final cyclical turn and "End of Trend" signal - but this happens when the pattern is "clean". In this case we got an over-shoot above the Pull Back (red dot) and in these cases I don't classify the pattern as a true "End of Trend" signal.

In any case the cyclical low turn was confirmed today with red support dots plotted under the low turning point. So the second condition was met, although the "End of Trend" signal was not a "clean" one.

Lastly, note how the last decline from 1,290 to 1,230 was on progressively lower volume. This suggests less supply and fewer aggressive sellers. This is a successful "Test" of the 1,200 low.

Then today we had a large volume up bar, followed by a midday quieter bar and then another large volume up bar. This is volume confirmation and shows the last cyclical turning point is likely to hold - and the third condition is met.

Emini Oscillators Image

Swing Trading Oscillators (Emini daily)

Quick check of my swing trading Oscillators. The Better TRIN and Better Smart Money have both turned up from over-sold and so this gives me more confidence that we'll get another upswing, possibly lasting several weeks.

Housekeeping Notes

I've recently updated the Better Volume code and so my charts don't look quite like yours (if you're using the Better Volume indicator). I will publish the new version of the code very soon and of course it will remain a free download.

I'm also using an updated version of the Better Sine Wave. The algorithm has not changed but the new code plots Pull Backs and has alerts for Trend Breaks, Pull Backs, End of Trend signals, etc. There's also a paintbar for trending conditions. I'm writing a feature article on the Hilbert Sine Wave and will circulate the new code to customers shortly.

The contact form on the Emini-Watch site is currently broken. I've not fixed it yet as I was getting burnt out from posting articles and replying to emails. I do appreciate all the comments, questions, suggestions and compliments that I get from visitors though. Thank you.

I hope this chart analysis was helpful to you. Good luck with your Emini trading.